Yukon government told sales tax best way to raise revenue

A financial panel appointed in May to advise the Yukon government on looming budget deficits says if taxes must be raised, the territory should consider a sales tax.

The panel says shifting taxes from income to consumption will also create a more stable source of revenue for the territorial government.

It suggests the government save money by looking at sharing services with other governments and contracting out some health care services.

Those could include diagnostic services and privately operated surgical facilities.

The lengthy report was released Tuesday by the five member panel chaired by Whitehorse accountant Norman McIntyre.

It notes the territory has projected deficits of $40 to $60 million in coming years after years of budget surpluses. It adds the territory will also be financially pressed by Yukon's aging population with increased demand for health care services.

But the report says the Yukon government's deteriorating financial health can be halted by, "only a modest slowing in the annual rate of spending growth, a modest increase in the annual rate of revenue growth, or some combination" of the two.

"Government spending is happening a little bit faster than its revenue, and so a hole is being dug, and the longer you wait, the deeper that hole becomes," said Ron Kneebone, an economist at the University of Calgary.

"If additional revenue is desired, the panel is united in understanding it should be through a territorial sales tax," Kneebone added.

The report says Yukoners pay substantially less taxes than Canadians in the south. It says adopting Alberta's low tax system would increase annual revenues by nearly $40 million.

Yukoners pay the federal Goods and Services Tax, but there is no territorial sale tax.

The panel says each 1 per cent of tax would raise $7 million plus rebates for people with low incomes.

Over the medium term it suggests the carbon tax could be used to reduce personal and corporate income taxes by 20 to 25 per cent.

Some other recommendations include more transparency in the government's budgets, a review of health care services to find cost efficiencies and review taxation on mining with a possible increase on the royalty rate on placer gold mining operations.

Gold valued at $15 per ounce for tax purposes

The current royalty on gold shipped from Yukon is 2.5 per cent of the value, but for the purpose of the tax the value of an ounce of gold is only $15. The actual value on Tuesday was pegged at more than $1,600.

The panel additionally recommends the government commit to depositing budget surpluses into a savings account to be used in budget deficit years.

The panel begins a 15 community tour Tuesday, to consult directly with individuals, businesses, municipalities, and First Nations.